Nowadays, consumers typically opt for digital forms of payment, making reliance on online payment gateways a new norm in modern business practice. And although it seems pretty simple at first glance, your choice of gateway options can greatly impact your business’s revenue and success. So, it doesn’t matter if you are a web hosting provider offering this service exclusively or are looking for a good web hosting plan, you need to have an idea of how the fees affect your business.
It’s always a good idea to look for a provider who offers multiple payment gateways - such as PayChoice - so that you can choose one that suits your needs the best. And in this article, we’ll give you some tips on how you can get the most out of it.
Every transaction within an online payment gateway comes with a fee. And the amount depends on the specificity of the gateway, the type of currency the gateways are based on, and the policy of the service provider. It may either be a fixed sum that is charged with each transaction or be a certain percentage of the sum involved.
Eventually, all the fees can add up and become too expensive for your customers - particularly in the market of website builders and content management systems, where amateurs and professional usage are both in need. In the case of the former, cheaper options will most likely be preferred on average, where hobbyists and non-professionals look to cost-effective approaches as a simple means of starting their online presence.
High fees can worsen their experience and deter them away - big businesses and enthusiasts alike. So, consider the costs when choosing your gateways and determine how it will affect your client’s sentiments.
Any online payment gateway can have direct consequences on your profit margins. These include:
Payment gateway fees are a cost of goods sold (COGS) since they consider the sale of your product or service, impacting your gross profit margin. So, if you have low profit margins, higher fees can eat into your profits.
As mentioned earlier, online payment gateway fees are often charged as a percentage of the transaction amount. That means, larger orders will result in higher fees. This can be particularly troublesome if businesses sell high-ticket items since fees can quickly add up.
If you have noticed that credit cards have higher fees than debit card transactions, this is because some payment methods are more expensive than others. So, if your customers pay with a more expensive method, of course, your profit margin will suffer.
Some payment processors offer lower fees if businesses have higher volumes of transactions. So, if you are starting out and have lower transaction volumes, you’ll be charged higher fees. And as expected, this will harm your profits.
Chargebacks occur when a customer disputes a transaction and requests a refund from their bank or credit card company. This can result in additional fees charged by the payment processor. Not to mention, it will result in lost revenue from the sale.
Since payment gateways can directly impact your profit margins, here are the following factors you need to consider:
The payment gateway you choose should have reliable security, and be compliant with PCI DSS Level 1. This will assure your customers that their data is protected and will reduce any chances of data breaches. While this notion can apply to any business, it’s especially sensitive here where users might be looking to your web services to upload content and data that’s more personal in nature. Keeping your data quality strong and secure, because of this, should be a priority in your criteria.
Since the online payment gateway fee can vary, you need to consider your transaction volume and value of your business to determine the most cost-effective option.
Customers prefer credit cards, debit cards, and e-wallets instead of cash. Among these, some payment methods are more popular in some regions than in others. So, you can offer different payment gateways to offer customers the option to choose and improve their satisfaction.
A payment gateway that offers developer tools, plugins, or APIs and can be integrated seamlessly within your website should be something to look out for.
Technical issues can take place in the case of payment gateways. So, you should always check whether the payment gateway you are going to choose will offer you full and round-the-clock technical support. It is best if there is responsive customer support via phone, email, or live chat.
If your hosting business operates globally, you’ll want to choose a global online payment gateway. That means, it should support transactions in the countries you do business in. Beware of any restrictions on the countries or currencies there might be.
The fees may appear differently on your invoice. Here’s how to recognise and calculate the fees:
Set-Up Fees: One-time fees charged by some providers for setting up a new account or integrating with their platform.
Transaction Fees: Fees charged for each transaction processed through the payment gateway. It is usually a percentage of the transaction amount or a flat fee per transaction.
Monthly Fees: Some providers charge a monthly fee for the use of their payment gateway. This fee is usually based on the volume of transactions processed or the features included in the plan.
Chargeback Fees: A chargeback fee is charged to the merchant when a customer disputes a charge and the merchant is required to return the funds to the customer.
The best way of minimising online payment gateway fees is to find the payment gateways with the lowest fees and payment methods. It’s worth mentioning that debit cards have lower fees than credit cards, and so do cryptocurrency gateway. The latter is because they are based on a different technology that suggests the absence of a centralised institution. If you’re unsure how to calculate the fees or which payment method to choose, get in touch with PayChoice today!